Americans have their choice of payment methods for most
purchases, including credit cards, debit cards, cash, checks and newer forms of
electronic payments, such as mobile wallets and wearables. As new forms of
payment become popular, our preferred methods of payment have been changing.

What method of
payment is the most popular?In a 2016 survey, payment processor TSYS asked over 1,000
consumers which payment form they prefer. Forty percent chose credit cards,
while 35 percent selected debit cards, and only 11 percent specified a
preference for using cash.1 Consumers’ preference for credit cards
increased by 5 percent over the same survey's results from 2015, while the
results for debit cards fell by 6 percent.1

The survey also found that debit cards were the preferred
method of payment for smaller, everyday transactions at supermarkets, gas
stations and convenience stores, while credit was the choice for more expensive
purchases, including those at department stores and restaurants, and for travel
reservations.1

Percentage by store type

Credit

Debit

Cash

Department store

36%

31%

9%

Discount store

25%

34%

22%

Gas station

35%

39%

16%

Supermarket

34%

46%

13%

Dine-in restaurant

35%

33%

18%

Fast-food restaurant

21%

30%

33%

Coffee shop

15%

23%

28%

Source: TSYS 2016 U.S. Consumer Payment Study

Preferred payment types varied by age, too. The TSYS survey
found that people ages 25 to 44 preferred credit cards, while the 18-24 crowd
and the 45-54 crowd preferred debit.1

FUN FACT:Although
mobile payment use jumped dramatically from previous years, only 13 percent
reported loading a credit card onto their mobile device in the last year.1

Why aren’t digital wallets catching on?Mobile devices have permeated many aspects of our daily
lives, but digital wallet use remains a small factor in the overall payments
picture.

Part of the reason could be on the retailer side, with only
36 percent of merchants reporting that they currently accept digital wallet
payments in a study commissioned by JP Morgan Chase.2 While 56 percent of large
businesses said they accept mobile wallets, only 25 percent of small businesses
said they accept them.2

Merchants are not the only slow adopters. In the same study,
only 16 percent of consumers said they had used a mobile wallet.2

Some factors cited as hampering the adoption of digital
wallets include fears about security and concerns that a merchant wouldn't
accept payments via digital wallets.

How do you believe you will be accepting/making the
majority of your payments 5 years from now?

Merchants

Consumers

56%

54%

69%

43%

43%

69%

41%

27%

26%

14%

Debit or ATM card

Credit card

Cash

Digital wallet

eCheck /ACH

Source: The Intersection of Payments and Commerce in a Digital World (JP Morgan Chase)

The 2017 American Express Digital Payments Survey
shows that 73 percent of consumers surveyed have made three or more online
purchases in the 12 months prior to June 2017. However, 37 percent say they
have abandoned an online purchase due to security concerns.3

Nevertheless, nearly half of online shoppers (47 percent) say
they’ve increased the frequency of their online purchases over the last year,
and 71 percent of merchants say the proportion of their annual sales generated
through online and mobile channels increased over the previous year. 3

However, the survey also shows that, security aside, plastic
is still preferred – 20 percent of those surveyed are no longer carrying cash
and 46 percent say that they rarely or never use cash.3

According
to EMVCo, an international standards organization, which reports over 6.1
billion EMV chip cards in global circulation. EMV adoption rates in the U.S. rose
to 52.2 percent in 2016, up from 26.4 percent in 2015.4

However, many consumers aren’t excited about the enhanced
security of chip cards.

Mobile payment processor Square found in a 2016 survey that
37 percent of respondents say that waiting in line was their top pain point at
stores, more than 87 percent of credit card users reported being frustrated
that chip cards were slower to process than those with magnetic stripes.
Ninety-one percent of debit card users expressed the same sentiment.5

The trend toward using
credit cards as a sole method of paymentIn recent years, the percentage of people who use their credit cards as their sole payment method (rather than to finance
purchases) has risen dramatically. More than half of all credit card holders use
their cards for everyday spending.

According to the FINRA 2016 Investor Education Foundation's
National Financial Capability Study, 52 percent of respondents reported always
paying their credit cards in full in 2015, representing an increase of 11
percent compared to the same study in 2009.6

While only 36 percent of total respondents said they used
P2P payments, 62 percent of millennials said they used them, and 34 percent of
Gen Xers. And among those who do not currently use P2P payments, nearly half
predicted they’d do so in 2017.7

P2P payments are seen as “less annoying” than other forms of
payment. For example, 51 percent of respondents found paying via check to be a
pain, while 38 percent were annoyed by delayed checks or checks that are never cashed.7

Of those who use P2P payments, 68 percent said the payment was
convenient and saved time, and 48 percent were motivated because friends were
using it.7

Cash payments
dwindleEarly predictions of a quick move to a cashless society have
proved premature, but cash payments are still plummeting. According to the 2016
Federal Reserve Payments Study, noncash payments increased at an annual rate of
5.3 percent (3.4 percent in value), between 2012 and 2015. Debit, credit and
ACH payments grew while check payments fell during this time period.8

A 2016 Gallup poll also found that far fewer Americans are
using cash than five years previously. Only 10 percent reported using cash for all
their purchases, down from 19 percent in 2011.9

But still, only 12 percent say they never use cash, hardly
changed from the 10 percent who said the same in 2011. 9

FUN FACT:With
nearly 90 percent using cash at least sometimes, we are far from the cashless
future once predicted.

How consumers are
paying their billsWhen you think of “preferred payment method,” you might only
consider retail purchases, both in-store and online.

But consumers must also select a method of payment when
paying bills.

Fiserv, an online bill payment provider, issued its 8th Annual
Billing House Survey in 2016, which found that more than 90 percent of
households used more than one payment method for paying bills. The average number
of payment methods in 2015 was 3.6, up from 2.9 in 2014. 10

More than 33 percent of those surveyed reported paying a
monthly bill through their mobile phone, a 22 percent increase over the
previous year's survey.10

However, by far the most popular payment method for bills is
the biller’s website, followed by checks and financial institutions’ websites.10

FUN FACT:Users of iPhones were more likely to use mobile bill payment than Android users, by a
margin of 49 percent to 38 percent.10

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